Innscor sinks US$125m into expansion over 2 years

Nelson Gahadza

Zimbabwe’s largest diversified group, Innscor Africa, says it has invested nearly US$125 million over the past two years towards the expansion of capital projects across its various business units.

Group chairman Mr Addington Chinake, commenting on the group’s financials for the year ended June 30, 2023, said the investment programme has allowed the establishment of new business units and products and enabled the expansion and modernisation of existing manufacturing lines.

He said this has also extended existing product categories and will ultimately enhance the overall manufacturing efficiencies and capabilities of the group as critical mass is reached.

“Much of this investment has recently been commissioned or is in the final stages of commissioning, and in the period ahead, we will deploy considerable focus and energy on ensuring these exciting new investments operate according to the necessary operating models, driving positive returns to shareholders,” he said.

He added that the group understands its responsibilities to the nation in providing world-class quality products at affordable prices and will continue to pursue expansion programs with this objective in mind.

Innscor is a focused group of light manufacturing businesses that, together with various strategically integrated agricultural operations, produce a number of Zimbabwe’s iconic brands in the consumer staple product space.

Mr Chinake said during the period under review, the group’s protein, stockfeeds, beverage, and light manufacturing segments delivered positive volume growth over the comparative year, while the impact of international wheat pricing carried over from the previous financial year had an adverse impact on the Mill-Bake segment.

Innscor’s investment drive underpinned the overall volume trajectory, with focus being deployed on expanding plant capacities, enhancing manufacturing capabilities, and product extensions, while route-to-market initiatives continued to be refined in order to drive volume into new markets.

From a trading perspective, Mr Chinake said the business models continue to undergo constant refinement to ensure they remain agile and relevant in a dynamic operating environment.

“It is vital that our expansion programs yield world-class quality products and that our increasing manufacturing capacities across our business units translate into economies of scale, resulting in excellent pricing for our customers,” he said.

Group revenue for the year under review grew 14,7 percent to US$804,040 million, driven by improved capacity utilization across the group’s core manufacturing businesses and further supported by the introduction of new product categories, category extensions, and route-to-market optimization strategies undertaken.

Mr Chinake said the group saw a mild contraction in margin efficiency terms of 3,7 percent, and this resulted mainly from reduced gross margin yield where the full increase in the core bills of materials could not be fully recovered in the sales price as units sought to minimize the impact of price increases on the consumer and maintain volume momentum.

In terms of the operations review, volume growth for the bakery division was muted compared to the comparative year, mainly on account of the pricing dynamics experienced early in quarter one, as inflated international wheat pricing resulted in an adverse effect on bread pricing for the consumer.

Mr Chinake said loaf volumes from quarter two through quarter four increased substantially, however, as local wheat stocks improved and international pricing softened.

The group recently completed the commissioning of its US$22 million investment into a state-of-the-art, fully automated production line in Bulawayo.

At National Foods, aggregate volumes contracted by 3 percent over the comparative period, mainly driven by the performance of the flour division. Volumes in the flour unit contracted by 12,3 percent versus the comparative year, driven largely by significant increases in the price of wheat.

“The flour division completed the installation of a new Buhler mill in Bulawayo, which will increase wheat milling capacity and operational efficiency across the division, while maize volumes declined by 9,4 percent versus the prior year.

In the protein category, at Colcom Foods, demand for fresh pork remained firm, resulting in volume growth of 8 percent, supported by double-digit growth across the sausage and polony categories over the comparative year.

Volume growth for the bacon and ham category was muted in the comparative year, reflective of the category’s reliance on the formal retail channel. At Irvine’s, volume growth was concentrated in the table egg and day-old chick categories, growing 14 percent and 7 percent, respectively, over the comparative year, while the frozen chicken category continued to operate at capacity, and volumes closed at the same level as the comparative year.

Mr Chinake said investments targeted at increasing breeder and laying capacity and hatchery extensions have been primary growth drivers, and the business looks ahead to initiating capacity enhancement investments for the frozen chicken category.

In the beverage division, Prodairy continued to register solid volume growth, with overall volumes closing 44 percent ahead of the comparative year.

The Dairy Blend category operating under the “Revive” brand benefited from prior capacity expansion investment, and volumes closed 83 percent ahead of the comparative year.

Mr Chinake said a similar growth of 73 percent over the comparative year was registered in the Steri-milk category, while the “Life” UHT milk, butter, and cream categories also delivered strong volume growth of 5 percent and 23 percent, respectively.